The most important thing when it comes to investing is to consider the outcome that will give us the financial independence we desire.
We need to think with the end in mind.
Financial independence involves two key things:
- Time: The date or time when we have the option to stop work and be financially independent. For most people this is between 55 to 65, but some are earlier and some later.
- Dollars: The second most important thing to understand is what income is required at that point in time.
From there, we can work out what capital you need to accumulate to get there.
It’s critical to ensure you’ve got enough time to accumulate the capital required to produce a passive income in the future.
Our belief is that for every $30,000 worth of income you desire in today’s dollars, you’ll require at least half a million dollars to achieve that outcome.
Once the end game is known, we work back to where you are today.
What are your current assets?
What are your current liabilities?
What is your current cash flow situation? What’s coming in and what’s going out?
The goal is to create investments that generate a passive income and create tax efficiencies for you, so you’re not working harder, but getting your money working smarter for you. When you get more and more money working for you, you can work less and less.
We also need to track our progress on a weekly or monthly basis. With any well run business or financial plan, we need to understand your position every 30 days, so we’re only ever 30 days behind how we’re tracking against original budgets.
We also need to ensure there are parameters in place that include managing the risk associated with investing, and the risk associated with injury or illness. We need to insure our current cash flow, to ensure that future cash flow is achieved.
Ultimately, understanding what the outcomes are that you want to achieve, and then putting a plan and process in place, will assist in achieving those key financial outcomes.
And that is part of the financial aspect of setting goals.
With goals and a flexible plan in hand, we’re that much closer to happily living in the moment, instead of stressing out about the future. The longer term plan actually helps us better focus on today.
Living today, and planning for the future!